 |
| Dumb and Smart Gamblers and Traders (15th Dec 2006) |
| This article is written to show how and what typical dumb and smart gamblers and traders think and do. It's my hope that you find it useful. After reading it, you can also discuss about the article |
| Dumb Gamblers | Smart Gamblers | Dumb Traders | Smart Traders |
| A |
Walks into the casino with X amount of $$ with HOPES of making it big |
Walks into the casino with X amount of $$ with a well thought out strategy and money mgmt |
Opens charting platform with the intention of FORCING a trade no matter what and hoping that the market will go in his favor |
Opens charting platform and eyeballs the different pairs looking for his best setup |
| B |
Looks for a game with very high POTENTIAL payouts and jumps in |
Looks for a game with the best possible odds of winning (i.e lowest house odds), allocates a part of his total $$ and proceeds to play the game |
Enters the market either picking a top/bottom and hoping to cash in on a major reversal OR rushes to join the trend hoping not to miss the boat |
Enters the market only after he has decided that he has the odds/edge on his side and has thought out how much risk to take |
| C |
At this point, if he wins, he (being greedy) continues betting the farm. If he loses, he gets emotional and tries to win back what he lost in the very next game. |
If he wins, he keeps part/all of the winnings and either plays another game or stops. If he loses, he accepts his loss and either looks for the next best opportunity or stops gambling altogether |
If the market does turn in his favor, he gets all excited and greedy. He makes little/no attempt to manage his trade by moving his stops. If the market goes against him, he feels angry and if he is stopped out, he either reverses his position (chases the market) or continues trading in the same direction wanting to prove that he is indeed right the first time round |
If the market goes in his favor, he stays cool and moves his stops accordingly. If market goes against him, he remains calm and either closes out his position because he feels the tide has turned or he waits for the limit order to take him out |
| D |
The dumb gambler continues going against the house/casino and withdraws more money from the ATM each time he runs out of funds and continues HOPING and PRAYING that he will finally hit the jackpot. He eventually stops gambling after having forced to face the pain of losing too much |
For the smart gambler, he either stops playing because he's happy and content with his winnings or that he has lost part/all of the amount he pre-decided was going to be the limit for that day |
The dumb trader continues to trade and lose equity until he can no longer face the pain and he's forced to stop |
The smart trader is either done for the day because he's already met his target and is flat or because he met his maximum allowable loss for that session/day |
| E |
He either continues to be dumb and returns the next time round or experiences a revelation/breakthrough and changes his method/mentality/$$ mgmt |
He either continues to be a smart gambler or starts learning how to trade after realising that trading has better odds in the long run (lol ... I'm biased!) |
He either continues trading in the ways he's always traded or experiences and realises that he's got to change the way he thinks and trades |
He is consistently increasing his account equity! |
| So ... are you the dumb trader or the smart trader? Discuss this article with the FXAddict Community |
New York: 
